IDEAS home Printed from https://ideas.repec.org/a/vrs/finiqu/v18y2022i1p66-73n4.html
   My bibliography  Save this article

Can we predict high growth firms with financial ratios?

Author

Listed:
  • Srhoj Stjepan

    (Assistant Professor of Economics Faculty of Economics, Business and Tourism, University of Split, Split, Croatia)

Abstract

This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related to the firm’s effectiveness in using assets to generate profits, EBITDA margin, debt ratio, equity-to-debt ratio and return on assets are associated with HGF status. While the financial ratios improve HGF prediction, prediction remains modest (AUC = 0.627). This study suggests it is difficult to assume a very good HGF forecast from only financial ratios; therefore, the recommendation for researchers and policymakers building models for predicting HGFs is to incorporate non-financial ratio variables, like the intangible innovation and team-related variables. Finally, study suggests a standardized reporting of prediction performance metrics in the out-of-sample and out-of-time simulation for HGF prediction studies.

Suggested Citation

  • Srhoj Stjepan, 2022. "Can we predict high growth firms with financial ratios?," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 18(1), pages 66-73, March.
    • Handle: RePEc:vrs:finiqu:v:18:y:2022:i:1:p:66-73:n:4
    DOI: 10.2478/fiqf-2022-0006
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/fiqf-2022-0006
    Download Restriction: no
    File URL: https://libkey.io/10.2478/fiqf-2022-0006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    high growth firms; prediction; financial ratios;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:finiqu:v:18:y:2022:i:1:p:66-73:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.